Money Laundering in Germany

The criminal offence of money laundering in Germany is regulated in § 261 of the German Criminal Code (StGB). In addition, the German Money Laundering Act (GwG) precisely records all prohibited actions related to this offence. This law follows the guidelines of the European Union’s Money Laundering Directives. It has, therefore, been subject to several changes in recent years, including the tightening of compliance requirements.

Money laundering in Germany is understood to mean the process of bringing in or hiding illegally acquired money or other assets amid legitimate economic cycles or business income. For example, when income from criminal activities is diverted by maintaining a legitimate business or investing in a legal company. Even though the criminal offence of money laundering is generally associated with organised crime, it is not uncommon for honest businesspeople or private individuals who actively participate in economic life to be confronted with such accusations in Germany. This is mainly because rapid transfers of assets on the financial and economic market often come into contact with a money laundering transaction without this being intended or foreseen.

It is generally expected that banks report suspicious transactions at an early stage and take countermeasures. However, this often conflicts with protecting their customers’ trust and confidentiality interests. Thus, the correct behaviour in the case of suspicious money laundering transactions in Germany can become a challenging balancing act. If sought in good time, the support and advice of a criminal law expert will work in favour of the person concerned.

Proving a money laundering offence in Germany can be particularly difficult due to concealment tactics. In particular, tracing the origin of the money can present the prosecuting authorities with sometimes unsolvable tasks.

Overall, this standard places the following requirements on the realisation of the money laundering offence:

• The money or other property in question must originate from one of the criminal offences listed in § 261 (1) sentence 2 StGB.
• The perpetrator must conceal or disguise its origin or prevent or jeopardise the investigation of its origin, discovery, confiscation, or seizure.
• The perpetrator must be aware that the assets originate from criminal activities and offences.

Accordingly, German law enforcement authorities must consider several aspects when proving a money laundering offence.

In addition to the intentional commission of the offence described above, § 261 (6) StGB also allows for the offence of money laundering to be committed ‘recklessly’. In these cases, a person does not act as they would in the case of simple money laundering, based on a specific intention, but rather because they act with gross negligence regarding the illegal origin of the money or an item. The person can, therefore, be accused of recklessly or out of indifference failing to recognise that money or an item originates from an illegal act. However, it should have been evident to them that the asset in question came from an illegal source based on the facts and circumstances.

Such accusations may arise, for example, if a person enters into an employment relationship that indicates money laundering activities due to disproportionately high pay or other unusual characteristics and the person has recklessly failed to recognise this. Therefore, activities as a so-called “financial agent” that involve financial transactions must be treated with the utmost scrupulousness. In particular, if the use of a private account is requested. The penalty for reckless money laundering in Germany is up to 2 years imprisonment or a fine. In addition, the injured party may also be entitled to claim damages from the financial agent for the illegal act.

Anyone who is found guilty of simple money laundering in Germany under § 261 (1) StGB faces a prison sentence of three months to five years. If the offender acts on a commercial basis or as a member of a gang that has formed to commit money laundering on an ongoing basis, this constitutes a serious case of money laundering according to § 261 (4) StGB, which results in an increased penalty of six months to ten years.

A lower penalty is provided if the offender recklessly fails to recognise that the money or property originates from a criminal offence, i.e. if they act with particular negligence. In this case, the penalty ranges from a fine to two years imprisonment.

A person who voluntarily reports the offence to the competent authority can escape criminal liability altogether under § 261 (9) StGB, provided that the offence has not already been fully or partially uncovered at the time. The same applies if the suspect causes the object to which the offence relates to be seized.

In addition to the penalties of § 261 StGB, money laundering offences may result in further sanctions. For example, if it turns out that the managing director of a company has used their position in the company to conceal money from a criminal offence, he may be excluded from this position for a considerable period of time in the future. A company involved in such a case may also lose important licences for certain industry activities. Furthermore, there is a risk of heavy fines.

Since money laundering offences also include the transfer of substantial amounts of illegally obtained money, financial institutions and companies in the financial sector have special obligations to prevent it. They are generally expected to establish extensive protective measures and monitoring mechanisms and have particularly efficient compliance management. For example, banks must investigate suspicious transactions, regularly report on them and provide information to the relevant authorities.

Likewise, lawyers and notaries are obliged to ensure that they are not involved in money laundering offences. It is in their own interest that law firms, law practices, auditors and tax advisors are fully aware of the requirements set out in the German Money Laundering Act (GwG). They are required to handle the cases entrusted to them per the law. Furthermore, preventive protective measures must be observed in the professional associations, bar associations, and chambers of auditors. Violating such self-regulatory provisions may otherwise have significant consequences for one’s professional future.

Above all, self-employed business owners or managing directors of a company should observe the following aspects if a money laundering offence is suspected:

• Financial records should always be kept up to date and regularly updated.
• The company’s transactions must be fully noted.
• The company’s financial accounts should be kept transparently.
• In addition, the requirements for due diligence and compliance measures when working with customers and their transactions must be strictly adhered to.

Overall, it is crucial to remember that larger transactions, in particular, which are not expected under normal circumstances or come from unusual sources and lack any financial justification, may give rise to suspicion.

If you have any suspicions about the execution of transactions or the cooperation with customers, it is advisable to consult a lawyer who is familiar with money laundering offences as a precaution. This situation requires tact and prudent action. Rash actions can result in losing a valued customer, while failure to take timely action can damage a company’s reputation and alert law enforcement. If you are unsure about the legal situation, it is also recommended that you seek legal counsel before contacting the authorities.

At Schlun & Elseven Rechtsanwälte, our criminal defence lawyers are at your side to support you in money laundering cases in Germany. In the case of money laundering offences, the risk for honest businesspeople of being unwittingly involved in criminal proceedings is particularly high. The suspicion of involvement can lead to incriminating investigations against the suspect, including the possibility of search and seizure measures.

Our German criminal defence lawyers will ensure that your rights as a defendant are always protected throughout the entire investigation and any subsequent criminal proceedings. We will work with you to develop a defence strategy tailored to your case to achieve the best possible outcome for you.